The Securities and Exchange Commission last week charged Fidelity Investments and 13 of its former and current employees—including Peter Lynch, the celebrated former manager of the Fidelity Magellan fund—with improperly accepting more than $1.6 million in gifts, travel, and entertainment from outside brokers seeking Fidelity’s business.

Fidelity will pay $8 million to settle the SEC’s charges, concluding a three-year investigation of Fidelity. The SEC and NASD (now FINRA) had previously fined Jeffries and Co. Inc. $9.7 million for its part in illegally lavishing gifts, travel, and entertainment on Fidelity equity traders.

The SEC found that, in some cases, the duty of Fidelity to seek “best execution”—the most favorable terms for mutual-fund transactions—was violated by Fidelity employees who sent business to brokers who were plying them with inducements ranging from a $160,000 Miami junket to tickets for Super Bowls and other sporting events and concerts. The SEC reported one Fidelity equity trader commenting to another: “Word is out that order flow is for sale.”

“The broker selection process on Fidelity’s equity trading desk was compromised when gifts and lavish entertainment swayed the flow of brokerage business,” said Walter Ricciardi, deputy director of the SEC’s Division of Enforcement in a statement accompanying the SEC action. “This misconduct created a serious risk of investor harm and violated Fidelity’s duty of allegiance and loyalty to investors.”

The SEC said the $8 million penalty takes into account previous Fidelity agreements with its mutual fund trustees and institutional and other clients to make other payments. In December 2006, Fidelity agreed to pay $42 million to certain Fidelity mutual funds after a review of the gift, travel, and entertainment scandal the by Independent Trustees of the Fidelity Funds.

The Fidelity case has a long and, at times, sordid history. The tawdry Miami junket, exposed in a 2005 Wall Street Journal article, involved a bachelor party held for Fidelity equity trader Thomas Bruderman. According to the SEC, Bruderman—who received more than $450,000 worth of gifts, travel, and entertainment from brokers from 2002 to 2004—solicited those brokers to arrange and pay for the $160,000 Miami event. The perks included private jet travel, luxury accommodations at The Breakers resort, limousine service, expensive dinners, and excursions to strip clubs. The SEC charged that brokers also hired two women to “entertain” attendees at the bachelor party and also provided Bruderman with a bag of ecstasy pills.

In another case, Fidelity equity trader Edward Driscoll received more than $45,000 in gifts, travel, and entertainment from brokers, consisting of trips to the Super Bowl and Las Vegas, as well as a family vacation to Disney World. According to the SEC, one broker also “facilitated” Driscoll’s illegal gambling by delivering bets to his bookie and by initially covering a $10,000 gambling debt.

In Lynch’s case, the SEC found that he obtained more than $15,000 in free tickets to sporting events and concerts, including the 1999 Ryder Cup in Brookline, Mass. Lynch obtained the tickets through requests to two traders on Fidelity’s equity trading desk, which, the SEC charged, caused those traders to violate an Investment Company Act provision barring the acceptance of compensation from outside sources when making a transaction on behalf of a mutual fund. “In asking the Fidelity equity trading desk for occasional help locating tickets, I never intended to do anything inappropriate,” said Lynch in a statement responding to Fidelity’s settlement with the SEC. “And I regret having made those requests.”

In a statement responding to Fidelity’s settlement with the SEC, Fidelity said that it “neither admits nor denies the findings in the SEC’s Order. And, although the Order makes no finding of financial harm to our shareholders or our funds, we do recognize the seriousness of the misconduct found by the SEC.” Fidelity also said that in the three years since the scandal came to light, it has taken remedial steps to ensure the misconduct doesn’t recur, including adding new management oversight on the equity training desk as well as providing extensive training for employees.

More on the SEC settlement with Fidelity.